ni 


iO 


LIBRARY 

OF  THE 

University  of  California. 


Gl  FT     OF 


Class 


MEMORIAL  TO  THE  LEGISLATURE 
OF  THE  STATE  OF  NEW  YORK 


FOR  AN  INVESTIGATION 
OF  THE  CONDITIONS  SUR- 
ROUNDING  GAS  AND 
ELECTRIC  LIGHTING  IN 
THE  CITY  OF  NEW  YORK 


07 


THE  MERCHANTS'  ASSOCIATION  OF  NEW  YORK 

Janunry  It,   1905 


^ 


'V 


'3 


MEMORIAL 

For  an  Investigation  of  the  Conditions  Surrounding  Gas 
and  Electric  Lighting  in  the  City  of  New  York* 

To  the  Honorable  the  Legislature  of  the  State  of  New  York: 

THE  Merchants'  Association  of  the  City  of  New  York  pre- 
sents this  memorial  and  petition  to  the  Senate  and  the 
Assembly  of  the  State  of  New  York,  and  begs  the  pas- 
sage of  a  resolution  authorizing  the  appointment  of  a  legislative 
committee  empowered  to  examine  into,  report  upon  and  make, 
recommendations  concerning: 

First — The  conditions  surrounding  the  production,  dis- 
tribution and  cost  of  gas  and  electric  light  in  the  City  of 
New  York  and  the  reasonableness  of  the  charges  therefor, 
both  to  the  City  and  to  private  consumers. 

Second — The  conditions  surrounding  the  operation  and 
control  of  the  electrical  subways  constructed  in  the  City  of 
New  York  under  the  provisions  of  the  statutes  of  this  State; 
the  accounts  and  earnings  of  such  subways  and  the  amounts, 
if  any,  due  the  City  as  the  result  of  their  operation. 

FIRST. 

AS  to  the  conditions  surrounding  the  production,  distribu- 
tion and  cost  of  gas  and  electric  light  in  the  City  of  New 
York,  and  the  reasonableness  of  the  charges  therefor, 
both  to  the  city  and  to  private  consumers,  it  is  respectfully  urged: 

These  conditions  and  the  question  of  the  fairness  of  the  price 

1 


IG4289 


which  both  the  city  and  private  consumers  pay  for  gas  and 
electric  Hght  need  thorough  investigation.  The  City  of  New 
York  is  compelled  to  purchase  lights  for  its  streets,  public  parks 
and  public  buildings  from  the  various  gas  and  electric  com- 
panies, doing  business  in  the  city.  Under  the  provisions  of  the 
city  charter  it  is  made  the  duty  of  the  Commissioner  of  Water 
Supply,  Gas  and  Electricity  of  the  City  of  New  York  to  adver- 
tise for  bids  for  public  lighting  and  to  execute  contracts  therefor 
after  such  public  bidding,  the  term  of  such  contracts  not  to 
exceed  one  year.  The  conditions  which  have  infallibly  been 
found  to  prevail  as  a  result  of  the  effort  of  the  said  city  depart- 
ment to  obtain  contracts  for  lighting  are  set  forth  in  reports 
made  by  the  department  to  the  Mayor  and  to  the  Board  of  Esti- 
mate and  Apportionment  of  the  city  during  the  years  1902  and 
1903.  When  the  city  administration  elected  in  the  fall  of  1901 
came  into  office  in  January,  1902,  the  contracts  for  public  light- 
ing had  substantially  been  awarded,  and  there  was  no  opportu- 
nity for  an  inquiry  into  the  reasonableness  of  the  charges  asked 
by  the  gas  and  electric  lighting  companies  for  public  service, 
until  the  year  1903;  but  the  Commissioner  in  charge  of  the  de- 
partment in  the  early  part  of  1902  reported  to  the  Mayor  of  the 
City  on  March  31,  1902,  as  follows: 

"The  City  of  New  York  pays  to  the  gas  and  electric 
Hght  companies,  for  lighting  its  streets,  highways,  parks, 
other  public  places  and  public  buildings,  more  than  three 
million  dollars  per  annum.  My  estimate  of  March  last 
made  the  figures  12,914,011.48,  but  this  estimate,  as  was 
afterward  ascertained,  did  not  include  numerous  contracts 
which  it  has  heretofore  been  the  custom  of  the  various  city 
departments  to  make,  independently  of  the  Department  of 
Public  Buildings,  Lighting  and  Supplies.  The  amount  of 
these  contracts  has  not  been  as  yet  fully  determined,  but  it 
probably  aggregates  |22o,000.  Unfortunately,  under  exist- 
ing business  conditions,  the  City  is  subject  to  monopoly 
rates  in  awarding  these  contracts,  for  there  is  no  genuine 
competition  for  bids.  The  New  York  Edison  Company,  the 
ConsoHdated  Gas  Company,  the  Brooklyn  Edison  Electric 
Illuminating  Company,  not  to  speak  of  other  combinations, 
are  without  rivals  in  their  particular  field,  and  the  City  is 
forced  to  pay  whatever  price  these  corporations  decide  to 

2 


charge.  Whether,  under  such  circumstances,  munici- 
paHzation  of  gas  and  electric  light  would  not  be  an  advan- 
tage, is  an  inquiry  worth  profound  consideration.  If  the 
City's  gas  and  electric  light  business  were  conducted  with 
due  regard  to  the  City's  interests,  there  would,  I  think,  be 
but  one  answer  to  the  question." 

On  March  12,  1903,  the  Honorable  Robert  Grier  Monroe, 
then  Commissioner  of  Water  Supply,  Gas  and  Electricity,  trans- 
mitted to  the  Board  of  Estimate  and  Apportionment  a  report 
stating  that  the  bids  for  gas  and  electric  lighting  for  the  year 
1903  which  had  been  submitted  to  him,  should  one  and  all  be 
rejected  under  the  power  conferred  upon  him  by  the  city  char- 
ter, on  the  ground  that,  within  five  years  prior  thereto,  the  light- 
ing interests  in  the  city  'had  all  practically  been  united,  with  the 
result  of  preventing  all  competition  between  rival  companies 
operating  in  the  same  field,  and  that  even  in  boroughs  where 
there  had  been  no  formal  consolidation,  the  territory  had  been  so 
apportioned  between  the  bidding  companies  as  to  preclude  all 
competition  between  them.  The  report  further  set  forth  that 
the  Consolidated  Gas  Company  of  New  York  controlled  all  the 
gas  and  electric  light  facilities  in  the  borough  of  Manhattan  as 
well  as  all  gas  and  electric  light  facilities  in  the  more  important 
sections  of  the  borough  of  The  Bronx,  with  the  effect,  so  far  as 
gaslight  was  concerned,  of  not  only  keeping  prices  at  a  maximum 
but  retarding  all  improvement  in  the  utilization  of  gas.  The 
report  further  stated: 

"The  appropriation  for  all  public  Hghting  for  this  year, 
1903,  is  13,306,346.23.  The  corresponding  appropriation  in 
1898,  the  first  year  of  Greater  New  York's  existence, 
amounted  to  |2,570,001.88.  The  increase  in  live  years  has 
been  $736,344.35,  or  between  28  and  29  per  cent.  Not- 
withstanding this  increase,  the  sum  appropriated  this  year, 
in  view  of  the  prices  asked,  is  entirely  inadequate  to  meet 
the  reasonable  requirements  of  the  City.  There  can  be 
little  improvement  in  the  densely  populated  sections  which 
are  now  insufficiently  lighted,  and  large  areas  which  have 
recently  been  improved  must,  for  the  time  being,  be  left 
without  any  lights  at  all. 

"The    growth  of   the  City,  the    many  public    improve- 


merits,  which  are  now  under  way — as,  for  example,  the  new 
bridges  which  are  rapidly  nearing  completion — all  mean  a 
great  increase  of  public  lighting;  and  unless  there  is  a  mate- 
rial reduction  in  prices  the  annual  appropriation  five  years 
hence  must  necessarily  equal  or  exceed  $5,000,000." 

The  report  further  showed  that,  in  the  borough  of  Manhat- 
tan, the  price  for  a  2,000-candle-power  electric  lamp  was  1146; 
in  Brooklyn,  for  a  1,200-candle-power  lamp,  |124.50;  whereas 
according  to  reliable  data,  obtained  by  the  department,  the 
prices  charged  by  various  electric  light  companies,  to  sixty-eight 
other  cities  where  conditions  similar  to  those  in  New  York  exist, 
for  supplying  such  cities  with  2,000-candle-power  lamps,  aver- 
aged $88.60,  and  to  twenty-three  other  cities  similarly  situated 
using  1,200-candle-power  lamps,  averaged  $81,08. 

The  capitalization  of  the  various  electric  light  companies  op- 
erating within  the  territory  of  Manhattan  and  The  Bronx,  all 
under  the  control  of  the  Consolidated  Gas  Company  of  the  City 
of  New  York,  was  shown  in  the  report  to  aggregate,  for  stock 
and  bonds,  about  $30,000,000,  a  sum  far  in  excess  of  the  actual 
value  of  the  several  plants  and  properties,  while  the  monster 
consolidation  formed  by  their  union  was  capitalized  at  $85,538,- 
000;  $45,200,000  in  stock  and  a  bonded  debt  of  $40,138,000,  this 
enormous  valuation  being  based  upon  the  profit  permitted  by 
the  monopoly  system  in  existence.  It  was  further  shown  that 
modern  improvements,  especially  in  the  concentration  of  the 
work  of  producing  power,  had,  in  recent  years,  effected  a  de- 
crease in  the  cost  to  the  companies  of  the  light  itself,  reducing 
the  cost  to  the  Consolidated  Gas  Company  to  about  three  cents 
per  kilowatt  hour  of  current  delivered;  but,  notwithstanding  this 
large  recent  reduction  in  the  cost  of  manufacture,  there  had  been 
no  corresponding  reduction  in  prices  to  the  city  or  to  the  con- 
sumers, in  fact,  no  reduction  at  all,  the  bills  presented  to  the 
Department  for  lighting  public  buildings  for  January,  1903, 
showing  that  the  city  was  charged  upon  an  average  at  the  rate 
of  ten  and  fifteen-one-hundredth  cents  per  kilowatt  hour,  or 
nearly  three  hundred  and  fifty  per  cent,  of  cost. 

The  report  fairly  proved  that  the  boroughs  of  Manhattan  and 

4 


The  Bronx  of  the  City  of  New  York  were  at  the  mercy  of  a 
Hghting  combination,  able  to  fix  prices  for  pubHc  lights  without 
any  competition  whatever;  that  the  companies  in  control  were 
immensely  overcapitalized;  that  their  prices  were  fixed  to  meet 
dividends  and  interest  charged  on  excessive  overcapitalization, 
and  that  the  prices  charged  included  excessive  profits  far  beyond 
the  cost  of  manufacture  and  delivery.  It  concluded  by  recom- 
mending that  the  city  be  empowered  to  establish  and  maintain 
an  electric  plant  for  lighting  its  streets,  parks  and  other  public 
places.  In  the  report  were  also  set  forth  figures  showing  the 
excessive  charges  made  for  gas  lighting  and  the  inability  of  the 
department  to  compel  the  companies  furnishing  gas  to  fulfil  the 
requirements  of  purity  and  illumination  fixed  by  law. 

The  borough  of  Brooklyn  is  equally  under  the  subjugation  of 
a  gas  and  electric  light  monopoly.  The  electric  light  and  power 
companies  are  owned  or  dominated  by  the  Kings  County  Electric 
Light  and  Power  Company.  All  rival  and  competing  gas- 
producing  companies  have  within  a  few  years  been  merged  into 
one  larger  aggregate  known  as  the  Brooklyn  Union  Gas  Com- 
pany, which  is  immensely  overcapitalized,  and  which,  in  order  to 
pay  dividends  upon  its  inflated  capital  and  heavy  interest 
charges,  exacts  from  the  city  and  private  consumers  unneces- 
sarily high  rates  and  at  the  same  time  furnishes  an  exceedingly 
poor  illuminant.  The  story  of  its  inflated  capitalization  and  the 
methods  devised  to  consummate  the  merger,  is  told  in  a  recent 
suit  between  the  promoters  of  the  deal.  Whether  the  water 
gas,  so-called,  which  is  the  product  of  the  Brooklyn  Union  Gas 
Company,  is  dangerous  to  life  and  health,  is  a  question  requiring 
expert  consideration  and  decision.  It  is,  however,  often  alleged, 
and  with  some  show  of  reason,  that  this  gas  is  deleterious  in  its 
effects  upon  the  human  system.  Complaints  of  its  insufficiency 
as  an  illuminant  are  made  all  over  the  borough.  One  has  but 
to  be  a  resident  in  that  borough  to  be  made  aware  of  the  fact 
that  either  the  standard  of  illumination  fixed  by  law  is  so  crimi- 
nally inadequate  as  to  imperil  eyesight,  or  that  the  light  which 
is  furnished  is  far  below  that  standard.  The  effect  of  this  in- 
adequate illuminant  upon  the  eyes  of  the  people,  however  much 

5 


light  is  consumed  and  however  large  the  consumers'  bills,  is 
pernicious  in  the  extreme.  The  light  appears  to  decrease  in  an 
inverse  ratio  to  the  size  of  the  combination  and  the  amount  of  its 
profits. 

In  consequence  of  the  report  of  Commissioner  Monroe  to  the 
Board  of  Estimate  and  Apportionment  advocating  the  passage 
of  legislation  to  enable  the  city  to  establish  and  maintain  an 
electric  lighting  plant  of  its  own,  a  bill  was  introduced  in  the 
Legislature  early  in  1903  and  its  passage  urged  by  the  municipal 
authorities  and  by  numerous  civic  organizations,  of  which  this 
Association  was  one. 

One  unanswerable  argument,  as  we  deemed  it,  in  favor  of  the 
bill,  was,  that  if  the  City  of  New  York  should  undertake  to  supply 
itself  with  electric  light,  it  would  have  various  decided  advantages 
over  the  consolidation  beneath  whose  yoke  it  remains,  for  it  would 
be  subject  merely  to  low-interest  payments,  based  on  loans 
measured  by  the  funds  actually  required  for  the  construction  of  a 
plant,  but  would  be  emancipated  from  paying  the  fixed  charges 
which  must  accompany  inflated  capitalization.  In  the  borough 
of  Manhattan,  where  electrical  energy  is  almost  universally  trans- 
mitted through  subways,  the  city  would  be  free  of  any  expense 
by  way  of  rental  for  the  space  occupied  in  the  subway,  because  the 
acts  of  the  Legislature  under  which  the  electric  subways  have 
been  constructed,  and  the  contracts  made  with  the  subway  com- 
panies specifically  provide  that  the  city  shall,  without  charge,  be 
furnished  with  all  spaces  in  said  subways  necessary  for  its  elec- 
trical conductors,  and  the  electrical  conductors  of  each  separate 
department  of  the  city ;  and  that  if  accommodation  is  not  practi- 
cable in  existing  subways,  more  must  be  built  to  meet  the  city's 
needs. 

The  bill  to  authorize  the  city  to  establish  a  municipal  lighting 
plant  was  never  favorably  reported  upon  by  either  the  Senate  or 
the  Assembly.  Consequently  that  measure  of  relief  was  denied, 
which,  in  the  judgment  of  the  then  municipal  authorities  and  of 
the  various  civic  organizations  supporting  the  bill,  its  passage 
would  have  given. 


We  are  glad  to  observe  that  in  his  message  of  January  1,  1905, 
to  the  Board  of  Aldermen  of  the  City  of  New  York,  the  Honor- 
able Mayor  of  the  City  advocates  the  enactment  of  legislation  to 
enable  the  City  to  erect  and  maintain  an  electric  plant  "to  light 
the  streets,  parks  and  public  buildings  of  the  City,"  and  has  caused 
a  bill  for  that  purpose  to  be  prepared  for  introduction  into  the 
Legislature.  In  his  message  the  Mayor  also  states :  "The  prices 
which  the  City  is  compelled  to  pay  for  gas  and  electric  light  are 
so  out  of  proportion  with  the  charges  in  other  cities,  that  they 
must  be  extortionate." 

The  Legislature  in  1903  having  seen  fit  to  refuse  to  empower 
the  City  to  establish  an  electric-lighting  plant  for  city  lighting,  the 
City  has  continued  to  remain  under  the  control  and  at  the  mercy 
of  the  several  lighting  companies,  and  private  consumers  are  still 
forced  to  pay  the  exorbitant  charges  exacted,  and  for  insufficient 
light.  If  the  Legislature  is  not  willing  to  authorize  the  City  to 
establish  an  electric-lighting  plant  of  its  own,  it  should  at  least 
investigate  this  entire  subject  and  by  its  investigation  either  con- 
firm or  refute  the  widely  prevalent  belief  that  the  prices  charged 
both  the  City  and  private  consumers  are  far  too  high  and  that 
the  illuminants  are  inferior  in  quality.  Even  if  the  City  should 
be  empowered  to  construct  an  electric-lighting  plant  (and 
we  believe  that  should  be  done),  inasmuch  as  that  plant  would 
not  carry  relief  to  private  consumers,  the  investigation  sought  is 
eminently  necessary  and  proper.  Some  idea  of  the  burden  placed 
upon  private  consumers  of  gas  is  given  in  an  official  report  of  the 
U.  S.  Government,  from  which  we  cite  below. 

In  the  Fourteenth  Annual  Report  of  the  Commissioner  of 
Labor  of  the  United  States  for  1899,  upon  "Water,  Gas  and 
Electric  Plants  and  Private  and  Municipal  Ownership,"  there 
appears  an  exhaustive  analysis  of  the  cost  of  gas  production  in 
more  than  one-half  of  all  the  gas  plants  of  the  country,  from 
which  the  deduction  is  made  by  the  Commissioner  that  under  the 
most  favorable  and  most  economical  conditions  of  production,  in 
plants  of  large  capacity,  the  average  cost  of  gas  does  not  exceed 
42  cents  per  one  thousand  cubic  feet  of  gas  sold.  The  cost  as  thus 
ascertained  includes  not  only  all  the  elements  of  manufacturing 

7 


cost,  but  also  allowance  for  waste  or  leakage,  depreciation,  interest 
on  investment  and  taxes. 

In  the  cases  cited  the  Commissioner  says :  "The  total  income 
for  the  year  was  $3,405,781,  and  the  cost  of  production,  including 
taxes,  depreciation  and  interest  on  investment  at  the  average  rate 
paid  on  the  last  issues  of  bonds  in  the  cities  involved  (3.5  per 
cent.),  was  $1,657,845,  leaving  a  net  profit  of  $1,747,936,  over  and 
above  the  cost,"  or  a  profit  in  excess  of  100  per  cent,  in  addition  to 
3^  per  cent,  interest. 

Even  though  the  City  be  empowered  to  erect  its  own  plant, 
under  existing  monopoly  conditions,  the  purses  of  its  citizens 
would  still  continue  to  be  drained  to  pay  these  enormous  profits. 

The  urgency  and  importance  of  an  investigation  at  this 
juncture  into  the  charges  for  public  lighting  are  emphasized  by 
the  fact  that,  within  a  few  weeks  past,  contracts  have  been 
made  with  the  gas  and  electric-lighting  combine  for  the  supply 
of  these  illuminants  to  the  City's  streets,  buildings  and  parks,  at 
the  extortionate  prices  of  which  the  late  Commissioner  of  Water 
Supply,  Gas  and  Electricity  complained,  prices  shown  by  him  to 
be  far  in  excess  of  the  rates  charged  by  corresponding  light- 
producing  companies  to  other  cities  of  the  United  States.  Ac- 
cording to  the  information  compiled  by  the  Department  of  Water 
Supply,  Gas  and  Electricity,  the  City  of  New  York  pays  the 
electric-lighting  monopoly  a  price  for  lights  which  represents  a 
profit  of  250  per  cent.  The  profit  from  the  sale  of  gas,  if  not 
quite  so  great,  far  exceeds  a  reasonable  percentage.  In  fact,  the 
excessive  nature  of  these  charges  is  confirmed  by  a  subcontract 
between  the  City  and  these  companies,  by  which  the  companies 
agree,  in  certain  cases,  to  make  slight  deductions  from  their 
prices ;  but  even  with  these  deductions,  the  charges  to  the  City 
are  altogether  exorbitant  and  unreasonable.  That  these  rates 
are  excessive  and  unjust  appears  to  have  been  recently  held  by  one 
of  the  Justices  of  the  Supreme  Court  of  this  State,  in  an  action 
instituted  by  a  tax-payer  of  the  City  to  enjoin  the  City  officials 
from  carrying  these  contracts  into  effect.  The  press  of  the  City, 
almost  without  a  single  dissenting  voice  and  irrespective  of  party 

8 


considerations,  has  united   in  denouncing  the  execution  of  the 
contracts  and  in  commending  the  action  of  the  tax-payer. 

SECOND. 

NOR  would  the  investigation  upon  which  we  respectfully  beg 
the  Legislature  to  enter,  be  complete,  unless  it  also  took 
into  consideration  the  conditions  surrounding  the  opera- 
tion and  control  of  the  electrical  subways  in  the  City  and  the 
inquiry  reached  so  far  as  to  ascertain  their  earnings  and  what 
amounts,  if  any,  are  due  from  them  to  the  City  of  New  York,  as 
the  result  of  their  operation. 

The  overhead-wire  conditions  in  the  former  City  of  New  York 
(the  present  Borough  of  Manhattan),  became,  years  ago,  so  in- 
tolerable that  the  Legislature,  in  1884,  directed  that  all  electrical 
conductors  be  placed  underground;  and,  in  1885,  it  passed  an  act 
establishing  in  cities  of  large  population,  a  board  of  Commissioners 
of  Electrical  Subways  whose  business  it  should  be  to  devise  a 
plan  and  scheme  for  the  construction  of  electrical  subways  suitable 
for  the  electrical  conductors  of  the  companies  using  aerial  wires 
in  their  business,  the  compulsory  removal  of  overhead  electrical 
conductors,  and  their  replacement  by  wires  in  underground  con- 
duits. Subway  companies  were  organized,  and  the  construction 
of  subways  and  the  leasing  of  subway  space,  under  the  supervision 
of  the  City  authorities,  were  delegated  to  such  corporations ;  and 
the  law  of  1885  was  amended  to  permit  such  delegation.  Under 
this  legislation,  the  Consolidated  Telegraph  and  Electrical  Sub- 
way Company  was  formed  and  an  agreement  was  made  between 
it  and  the  City  of  New  York,  by  which  it  was  to  build  the  sub- 
ways and  lease  space  therein.  When  it  was  discovered  to  be 
dangerous  to  operate  high  and  low  tension  wires  in  the  same 
conduits,  a  new  agreement  was  made  with  the  Consolidated  Com- 
pany for  the  construction  of  separate  subways  for  conductors 
carrying  a  high  potential.  The  Empire  City  Subway  Company, 
Limited,  was  incorporated  to  build  subways,  conduits  and  ducts 
for  telegraph  and  telephone  wires  and  for  the  low-tension  electric 
light  and  power  conductors  of  the  Edison  Electric  Illuminating 
Company  of  New  York  (one  of  the  companies  since  absorbed  by 

9 


the  Consolidated  Gas  Company).  The  Consolidated  Telegraph 
and  Electrical  Subway  Company  is  said  to  be  owned  by  the  New 
York  Edison  Company,  and  this  last-named  company  is  the 
property  of  the  Consolidated  Gas  Company.  Thus  both  subway 
companies  appear  to  be  under  one  control — that  of  the  lighting 
monopoly. 

Under  the  aforesaid  legislation  and  the  contracts  entered  into 
between  the  City,  through  the  Board  of  Commissioners  and  the 
Consolidated  Telegraph  and  Electrical  Subway  Company,  and  the 
Empire  City  Subway  Company,  Limited,  the  City  reserves  the 
right,  without  charge,  to  all  subway  space  necessary  for  its  electri- 
cal conductors  and  the  electrical  conductors  of  each  of  its  separate 
departments,  and  may  compel  the  companies  to  furnish  it  with 
additional  space,  if  necessary,  by  the  construction  of  new  subways ; 
but  it  is  credibly  asserted  that  the  Consolidated  Telegraph  and 
Electrical  Subway  Company  has  refused  to  accede  to  the  demands 
of  the  City  for  requisite  space  and  that,  because  of  its  refusal, 
some  of  the  City  departments,  notably  the  Fire  Department,  has 
been  obliged  to  maintain  overhead  wires  within  the  Borough  of 
Manhattan.  The  contracts  and  legislation  further  provide  that 
whenever  the  net  annual  profits  of  each  company,  after  the  deduc- 
tion of  its  operating  expenses,  shall  exceed  10  per  cent,  upon  the 
actual  cash  capital  investment,  the  excess  of  such  profit  over  10 
per  cent,  shall  be  paid  into  the  treasury  of  the  City  of  New  York ; 
and  each  Company  is  also  obligated  to  keep  just,  true  and  full 
books  of  account,  showing  in  detail  all  its  transactions,  including 
the  amount  of  subway  space  leased  to  various  electrical  com- 
panies, with  the  number  and  kind  of  electrical  conductors  therein, 
and  the  rentals  in  each  instance,  such  books  to  be  at  all  times 
accessible  to  the  Comptroller  of  the  City  of  New  York.  Not- 
withstanding these  provisions,  the  Consolidated  Telegraph  and 
Electrical  Subway  Company  has  failed  to  pay  to  the  City  such 
excess  of  net  profit  over  10  per  cent,  and  an  action  was  recently 
instituted  by  the  City  of  New  York  to  compel  an  accounting  and 
to  recover  the  share  of  profit  to  which  the  City  is  entitled.  A 
similar  suit  is  pending  against  the  Empire  City  Subway  Com- 
pany, Limited.     The  legislation  and  contracts  prescribe  also  that 

10 


at  any  time  after  January  1,  1897,  upon  demand  of  the  Com- 
missioners of  the  Sinking  Fund  of  the  City  of  New  York,  all  the 
property  of  either  subway  company  with  all  its  leases  may  be 
transferred  to  the  City  upon  payment  by  the  City  to  the  company 
of  not  less  than  the  actual  cost  of  construction  except  where  the 
company  shall  not  have  earned  10  per  cent,  on  such  cost,  in  which 
case  an  additional  payment  is  to  be  made.  The  cost  of  these  sub- 
ways was  stated  in  the  Franchise  Tax  proceedings  before  the  late 
Judge  Robert  Earl,  to  be  $6,000,000,  but  the  testimony  in  the 
proceeding  showed,  and  Judge  Earl  found  in  his  decision,  that 
they  could  be  duplicated  for  $2,650,000.  In  January,  1904,  the 
Treasurer  of  the  Consolidated  Telegraph  and  Electrical  Subway 
Company  filed  a  sworn  statement  with  the  Comptroller  to  the 
effect  that  the  cost  of  construction  of  electric  light  and  power 
subways  to  January  1,  1903,  amounted  to  $7,492,200.62.  Tlie 
Commissioners  of  Accounts,  after  an  examination  of  the  books  of 
the  company  in  September  last  (1903),  reported  that  the  amount 
given  by  the  Treasurer  of  the  company  is  over  $3,000,000  above 
the  true  cost. 

It  is  the  common  belief,  deduced  from  the  practical  identity 
of  the  stock  interests,  that  the  subway  companies  are,  in  some 
occult  but  effective  manner,  articulated  with  the  gas  and  electric- 
lighting  combine  within  the  former  City  of  New  York  and  that 
such  combination  owns  or  in  effect  controls  the  subway  companies 
and  the  subway  space,  all  of  which  efficiently  works  to  preclude 
all  possible  competition  in  gas  and  electric  lighting,  because  if  new 
lighting  companies  were  to  be  organized  it  would  not  be  possible 
for  them  to  conduct  their  business  within  the  territory  of  the 
former  city  unless  their  wires  were  placed  in  underground  con- 
duits ;  whereas  all  such  subways  are  under  the  control  of  the 
present  lighting  monopoly,  which,  upon  various  pretexts,  would 
refuse  admission  into  the  subways  to  any  probable  competitor. 
Again,  under  the  Transportation  Corporations  Law,  no  lighting 
company  can  enter  the  field  without  the  consent  of  the  "municipal 
authorities,"  which  has  been  interpreted  by  the  Court  of  Appeals 
to  mean,  the  Board  of  Aldermen,  in  the  City  of  New  York.  The 
present  combination  has,  through  its  domination  of  existing  com- 

11 


panics,  obtained  the  ownership  of  practically  all  extant  franchises 
(many,  perhaps,  of  doubtful  legality)  and  if  it  be  as  influential  as 
some  fear,  the  difficulty  of  a  competitor's  obtaining  a  new 
franchise  from  the  "City  authorities"  becomes  almost  insurmount- 
able. Hence  by  every  avenue  of  approach,  threatened  competition 
is  vigilantly  averted ;  it  is  prevented,  firstly,  by  the  consolidation 
of  the  lighting  interests,  secondly,  by  the  control  this  consolidation 
has  gained  over  the  subway  companies,  and,  thirdly,  by  its  owner- 
ship of  extant  lighting  franchises  and  the  difficulty,  perhaps  im- 
possibility, that  would  confront  any  new  rival  in  obtaining  a 
franchise  from  the  Board  of  Aldermen. 

Early  in  the  year  1902,  the  Commissioner  then  in  charge  of 
the  Department  of  Water  Supply,  Gas  and  Electricity,  instituted 
an  effort  to  accomplish  the  removal  of  dangerous  overhead 
electric-light  wires  and  their  replacement  in  underground  subways 
within  the  Borough  of  Brooklyn.  Under  his  initiative  energetic 
measures  were  taken  toward  the  consummation  of  this  much- 
to-be-desired  end,  and  the  work  has  since  been  continued.  The 
conditions  in  Brooklyn,  as  described  in  a  report  made  by  the 
Commissioner  to  the  Honorable  Seth  Low,  Mayor,  and  Chairman 
of  the  Board  of  Estimate  and  Apportionment,  on  June  9,  1902, 
exemplify  the  danger  to  life  and  property  from  the  continuance 
of  the  present  overhead-wire  conditions  in  that  Borough,  and  this 
danger  is  intensified  by  the  presence  overhead  of  the  heavy  trolley 
feed  wires  of  the  several  trolley  companies. 

Concerning  the  electric  light  wires  the  said  Commis- 
sioner observed  in  his  report: 

"These  are  a  great  source  of  danger  in  a  variety  of  ways. 
Strung,  as  the  wires  repeatedly  are,  over  or  under  telegraph 
and  telephone  wires,  on  poles  of  great  height,  they  are  in 
constant  danger  of  being  thrown  either  to  the  street  or  into 
contact  with  the  low-tension  wires,  and  the  moment  such 
contact  occurs  and  the  insulation  of  the  wire  is  sufficiently 
abraded,  the  low-tension  wire  becomes  a  conductor  of  the 
high-tension  current.  Nor  is  the  danger  obvious,  because 
the  current  may  be  carried  miles,  and  either  a  pedestrian 
upon  the  street  or  a  lineman  attempting  to  repair,  at  a  dis- 
tance from  the  point  of  contact  of  the  wires,  receive  a  shock 

12 


sufficient  to  kill  or  permanently  injure,  or  a  current  mig-ht 
be  carried  over  low-potential  conductors  into  a  building, 
which,  not  having-  been  safeguarded  against  the  destructive 
current  of  a  high-potential  system,  would  probably  be  set 
on  fire,  as  happened  in  Brooklyn  in  February  last  (1902)  at 
No.  504  Hamilton  avenue,  office  of  Nelson  Bros.,  according 
to  a  report  of  the  New  York  Board  of  Fire  Underwriters 
to  me. 

"During  the  storms  of  last  February  it  is  a  well-known 
fact  that  poles  gave  way  or  wires  were  unfastened  and 
thrown  in  a  confused  and  dangerous  network  upon  the 
streets,  that  horses  were  killed,  and,  in  many  instances, 
human  life  was  endangered.  Similar,  if  not  worse,  accidents 
have  occurred  in  other  boroug'hs  of  the  City  where  wires  of 
varying  potential  are  suspended  overhead." 

We  beg  to  remind  you  that  in  the  year  1885  the  Senate  of  this 
State  authorized  a  full  inquiry  into  the  conditions  surrounding 
the  cost  and  distribution  of  gas  in  the  former  City  of  New  York, 
which  elicited  a  mass  of  information  revealing  the  utter  absence 
of  competition  among  the  ostensibly  competing"  gas  companies 
of  that  day.  The  Senate  Committee,  under  the  chairmanship 
of  the  Hon.  Edward  B.  Thomas  (now  United  States  Circuit 
Judge  in  the  Eastern  District  of  New  York),  reported  that  the 
New  York  Gas  Light  Company,  the  Manhattan  Gas  Lig'ht  Com- 
pany, the  Harlem  Gas  Light  Company,  the  Metropolitan  Gas 
Light  Company,  the  Mutual  Gas  Light  Company,  the  Municipal 
Gas  Light  Company,  the  Knickerbocker  Gas  Light  Company 
and  the  Equitable  Gas  Light  Company  had  one  after  another 
been  destroyed  or  welded  into  the  formidable  combination 
known  as  the  Consolidated  Gas  Company,  organized  in  1884,  for 
the  purpose  of  absorbing  all  extant  gas  companies  operating 
within  the  former  city.  Within  a  few  months  after  it  obtained 
its  charter  it  had  swallowed  up  all  these  companies,  except  the 
Mutual,  the  charter  of  which  forbade  consolidation  with  other 
companies,  the  total  capitalization  of  the  new  consolidation  being 
$39,078,000.  This  capitalization  of  |39,078,000  was  declared  by 
the  Senate  Committee  of  1885  to  be  worth  less  than  $20,000,000. 
Nearly  $8,000,000  had  been  issued  for  alleged  franchises  and 
rights,  which  were  worthless  and  extinct.     Genuine  competition 

13 


in  gas  manufacture  has,  in  fact,  never  been  permitted  long  to 
exist  in  any  part  of  the  City  of  New  York. 

The  advent  of  the  electric  light,  for  a  brief  time,  held  out  the 
promise  of  relief.  But  hope  was  soon  extinguished.  Combina- 
tion among  various  electric  lighting  companies  was  soon  con- 
certed, and  forced  by  stock  operators,  until  in  the  early  part  of 
1899,  all  the  electric  lighting  companies  were  absorbed  in  the 
New  York  Gas  and  Electric  Light,  Heat  and  Power  Company. 
Shortly  thereafter  a  larger  consolidation  was  effected  between 
this  company,  which  was  a  branch  of  the  Consolidated  Gas  Com- 
pany, and  the  Edison  Electric  Illuminating  Company,  under  the 
name  of  the  New  York  Edison  Company,  with  a  capitaUzation, 
as  above  stated,  of  |85,338,000.  The  electric  lighting  companies 
in  Brooklyn  are  in  association  with  the  monopoly  in  Manhattan, 
and  this  monopoly  either  has  extended,  or  is  about  to  extend, 
itself  so  as  to  embrace  the  other  boroughs  of  the  Greater  City. 
The  press  of  the  city  recently  announced  the  acquisition  by  the 
Consolidated  Gas  Company  of  the  Westchester  Lighting  Com- 
pany, which  operates  in  an  important  section  of  The  Bronx.  If 
a  legislative  investigation  of  the  gas  consolidation  was  appro- 
priate, in  1885,  an  inquiry  by  you  into  the  conditions  which  have 
developed  from  the  alliance  of  all  the  lighting  interests  is  far 
more  imperatively  demanded  at  this  time.  The  City  of  New 
York  is  under  existing  conditions  called  upon  heavily  to  con- 
tribute out  of  its  treasury  to  the  payment  of  the  interest  on  the 
bonded  indebtedness,  and  dividends  upon  the  stock,  of  these 
heavily  overcapitalized  combinations,  and  a  similar  excessive 
burden  is  imposed  upon  the  taxpayers  throughout  this  great 
municipality. 

In  whatever  guise,  however  masked,  the  monster  monopoly 
in  control  of  lights  and  subways  in  Manhattan  has  thus  far  suc- 
ceeded in  frustrating  all  efforts  of  the  city  and  of  private  con- 
sumers to  escape  from  its  exactions.  For  franchises  of  untold 
value  it  has  paid  no  taxes  to  the  State;  and,  on  the  other  hand, 
it  resists  the  attempts  of  the  municipal  authorities  to  examine  the 
books  of  its  subway  operations  or  to  obtain  an  accounting  as  to 
the  city's  undoubted  shares  in  the  profits  of  such  operations. 

14 


If  we  are  correctly  advised,  none  of  the  gas  or  electric  light 
companies  operating  within  the  greater  city  have  yet  paid  any 
franchise  taxes. 

If  the  conditions  herein  portrayed  exist — if  they  are  even 
partially  true — the  people  of  the  City  of  New  York  and  the  city 
itself,  thus  preyed  upon  and  distressed,  are,  upon  the  plainest 
principles,  entitled  to  relief  from  the  Legislature  of  the  State. 
Whether  the  facts  are  such  as  we  believe  and  assert,  your  inves- 
tigation will  determine. 

Very  respectfully  submitted, 

J.  Hampden  Dougherty, 

Chairman, 
F.  E.  Kinsman, 
Charles  R.  Lamb, 
W.  A.  Marble, 
Herman  A.  Metz, 

Committee  on  Gas  and  Electricity, 

The  Merchants'  Association  of  New  York. 

New  York,  January  11,  1905. 


£5LlF^'?^!^*■:^^" 


15 


RETURN  TO  the  circulation  desk  of  any 

University  of  California  Library 

or  to  the 

NORTHERN  REGIONAL  LIBRARY  FACILITY 
BIdg.  400,  Richmond  Field  Station 
University  of  California 
Richmond,  CA  94804-4698 


1 

4 

Si 


ALL  BOOKS  MAY  BE  RECALLED  AFTER  7  DAYS 
2-month  loans  may  be  renewed  by  calling 

(510)  642-6753 
1-year  loans  may  be  recharged  by  bringing  books 

to  NRLF 
Renewals  and  recharges  may  be  made  4  days 

prior  to  due  date 


DUE  AS  STAMPED  BELOW 


SEP  2  2  f993 


VJONfT^^ 


LD 


■f  New  ^ 

ork." 

«  XM  i  AUt^ 

[emorial 

to  the  legis 

the  state  ^f 

- 

r  Yark. 

t             It 

_^^4^ 

^^  Jr^J!^./HjJ 

UAT) 

0 

\j^.      \^ 

- 

/  4r. 

,N7/' 

«N  \crrV. 

U289 

Ne 

^      " 

/ 

J  '.,    .  U  I  O-J 


UC    BERKEltY  LIBRARIES 


CD3m57Tfi 


